2005 BCSC 63 Beauchamp v. Insurance Corporation of British Columbia

Before: The Honourable Mr. Justice Goepel

Reasons for Judgment

Counsel for the Petitioner/Respondent:	W.D. Mussio
Counsel for the Respondent/Appellant:	R.F. Hungerford
Date and Place of Trial/Hearing:	January 4, 2005
	Vancouver, B.C.

INTRODUCTION

[1] The Insurance Corporation of British Columbia ("ICBC") appeals from a Master's order appointing an arbitrator pursuant to s. 148.2 of the Revised Regulation (1984) Under the Insurance (Motor Vehicle) Act, B.C. Reg. 447/83 (the “Regulation”). The issue is whether a claim for underinsured motorist protection (“UMP”) can proceed while the underlying tort action remains outstanding.

BACKGROUND

[2] The order was made pursuant to a petition commenced on May 26, 2004. The petition contains the following statements of fact:

1. On September 30, 1995, the Petitioner was a passenger of a 1991 Cheverolet [sic] Blazer licence plate number 975565 (the "Blazer") operated by Timothy Alexander Smith ("Mr. Smith").

2. Mr. Smith was driving the Blazer on Observation Mountain, near the City of Grand Forks, in the Province of British Columbia when he lost control of the Blazer causing it to roll (the "Accident").

3. Mr. Smith had acquired possession of the Blazer by stealing the Blazer from ABH Car Sales Ltd. from a sales lot in the City of Grand Forks, in the Province of British Columbia.

4. The Petitioner was a passenger in the Blazer driven by Mr. Smith and suffered injuries as a result of the Accident.

5. At the time of the Accident, the Blazer was owned by ABH Car Sales Ltd., and insured under a Garage Policy effective from January 11, 1994 to October 31, 1995.

6. On March 21, 1997, the Petitioner, by his Guardian ad Litem, Margaret Beauchamp, commenced an action against Mr. Smith, claiming damages arising from the Accident (Michael Beauchamp, by his Guardian Ad Litem, Margaret Beauchamp v. Timothy Alexander Smith, Supreme Court of British Columbia, Vancouver Registry No. B971892 (the "Action").

7. By letter dated November 10, 1998, the solicitor for the Respondent stated that the position of the Respondent was that the Petitioner was not entitled to benefits under the uninsured and/or underinsured vehicle provisions of the Insurance (Motor Vehicle) Act, R.S.B.C. 1996, c. 231 (the "Act"), and was not entitled to Part VII benefits under the Act.

8. On June 23, 1999, the Respondent Insurance Corporation of British Columbia commenced an action against the Petitioner (Insurance Corporation of British Columbia v. Michael Beauchamp, Supreme Court of British Columbia, Vancouver Registry No. B992654 (the "ICBC Action").

9. In the ICBC Action, the Respondent claimed that the Petitioner was not entitled to payment of damages pursuant to section 20 of the Act.

10. The Petitioner was required by the Revised Regulation (1984) under the Act to obtain a determination of section 20 coverage before being able to proceed with an Underinsured Motorist Protection ("UMP") claim.

11. By a letter dated February 27, 2002, the position of the Respondent was outlined by counsel for the Respondent: "UMP does not apply until it has been determined that the claim is against an uninsured motorist, someone who is unable to pay the full damages awarded to the claimant, which in this case has not yet been determined."

12. The ICBC Action concluded with the Petitioner agreeing that he was not entitled to section 20 coverage as the Accident did not occur on a "highway" as required by section 20 of the Act.

13. On May 9, 2003, a Consent Order was entered in the Vancouver Registry of the Supreme Court of British Columbia declaring that the Accident did not occur on a "highway" for the purposes of section 20 of the Act, and that the Petitioner is not a "claimant" as defined in section 20 of the Act.

14. By letter dated January 26, 2004, Wes Mussio, solicitor for the Petitioner, wrote to the solicitor for the Respondent, Robert Hungerford. Mr. Mussio stated that given the Respondent's position that the Petitioner was not entitled to UMP coverage, pursuant to section 148 of the Regulations, the dispute with respect to the Petitioner's entitlement to UMP coverage should be submitted to an arbitrator pursuant to the Commercial Arbitration Act. Mr. Mussio requested that Mr. Hungerford provide the names of three arbitrators acceptable to the Respondent.

15. By a letter dated February 6, 2004, Mr. Hungerford advised Mr. Mussio that the position of the Respondent was that the Petitioner had not pursued "all other remedies available to him" and therefore was not qualified to claim underinsured motorist protection. The position of the Respondent was that given that the Respondent [sic] "has not satisfied this fundamental prerequisite, any arbitrator appointed to hear this matter would lack requisite jurisdiction."

16. By an email sent February 10, 2004, Mr. Mussio informed Mr. Hungerford that the Petitioner had pursued all avenues to receive compensation "including seeking damages from Timothy Alexander Smith and seeking coverage under Section 20. Mr. Smith is without assets to satisfy any judgment and it has been determined by Court Order that Mr. Beauchamp is not entitled to payment under Section 20." Mr. Mussio again informed Mr. Hungerford that any disagreement should be decided by an arbitrator, and again requested the Respondent's choice of arbitrators.

17. By a letter dated February 13, 2004, Mr. Hungerford informed Mr. Mussio that the Respondent took the position that the Petitioner had not satisfied the requirements of the UMP provisions under the Regulations, and that Section 148.2 of the Regulations did not apply as there was no unsatisfied judgment in the underlying tort action, so there was to "underinsured motorist." Mr. Hungerford further advised that the position of the Respondent was that the fact that Mr. Smith was without assets did not fulfil "what is a fundamental precondition for the UMP arbitration."

18. By a letter dated April 19, 2004, Mr. Mussio made another request to Mr. Hungerford for the Respondent[']s choice of arbitrators, and informed Mr. Hungerford that if no response was received, an application would be made.

19. No response to Mr. Mussio's letter of April 19, 2004 has been received.

[3] Mr. Beauchamp’s tort action against Mr. Smith has moved slowly. Although the writ was issued on March 21, 1997, the statement of claim was not filed until May 5, 2004. The statement of defence was filed May 25, 2004.

[4] Liability is contested in the tort action. The statement of defence alleges that Mr. Beauchamp and Mr. Smith were engaged in a criminal enterprise and that the legal principles of ex turpi causa non oritur actio and volenti non fit injuria are complete answers to the Mr. Beauchamp’s claim. The defence also pleads that Mr. Beauchamp was contributorily negligent.

[5] The tort action is to be heard by a jury. It is estimated that the trial will take 20 days.

STATUTORY FRAMEWORK

[6] Part 10, Division (2) of the Regulation provides for UMP coverage. The provisions relevant to this application include:

148.1 (1) In this section:

...

“underinsured motorist” means an owner or operator of a vehicle who is legally liable for the injury or death of an insured but is unable, when the injury or death occurs, to pay the full amount of damages recoverable by the insured or his personal representative in respect of the injury or death.

(2) Where death or injury of an insured is caused by an accident that

(a) arises out of the use or operation of a vehicle by an underinsured motorist, and

(b) occurs in Canada or the United States of America or on a vessel travelling between Canada and the United States of America,

the corporation shall, subject to subsections (1), (5) and (6) and section 148.4, compensate the insured, or a person who has a claim in respect of the death of the insured, for any amount he is entitled to recover from the underinsured motorist as damages for the injury or death.

...

148.2 (1) The determination as to whether an insured provided underinsured motorist protection under section 148.1 is entitled to compensation and, if so entitled, the amount of compensation, shall be made by agreement between the insured and the corporation, but any dispute as to whether the insured is entitled to compensation or as to the amount of compensation shall be submitted to arbitration under the Commercial Arbitration Act.

POSITIONS OF THE PARTIES

[7] Mr. Beauchamp submits that his entitlement to UMP coverage should be arbitrated before the tort claim is resolved. He says that if he is not entitled to UMP coverage, it is unlikely that the tort action will proceed. He submits that he should not have to incur the cost and expense of a trial if ultimately he will be unable to recover the amounts that might be awarded to him in damages.

[8] ICBC submits that a claim for UMP coverage cannot proceed until it is established that the insured was injured in an accident arising out of the operation of a vehicle by an underinsured motorist. This requires a determination of both legal liability and inability to pay damages on the part of the operator of the vehicle.

[9] ICBC relies on Dahl v. Whitehill (1996), 17 B.C.L.R. (3d) 226 (S.C.). In Dahl, the parties agreed that the plaintiff was entitled to UMP coverage. The dispute was in regard to compensation. In his decision, Hogarth J. noted at ¶ 7 that s. 148.2(1):

... relates to the preceding section, 148.1, and presumes before the application of the arbitration provision comes into effect, that the "insured" is an "insured" as defined by the earlier section and that an "underinsured motorist" is the cause of the injuries for which compensation is claimed.

[10] Hogarth J. went on to hold at ¶ 13:

In my view subsection 148.2 does not apply until it has already been determined that the person claiming, the "insured", is claiming as a consequence of an accident with an "underinsured motorist", that is, someone who is unable to pay the full damages awarded to the insured. This amount can only be claimed in the action and after a trial or an assessment. The Third Party can defend the action in the stead of the Defendant if it so desires and raise the question of contributory negligence, but before any claim can be made under the provisions of an UMP the final amount in the action is to be determined, as until then there is no "underinsured motorist".

DECISION OF THE MASTER

[11] The Master distinguished Dahl. He held that Dahl did not lay down an absolute rule that an arbitrator can have no jurisdiction until a judgment has been made. He noted that the Regulation does not make any reference as to when the arbitration should take place and held that, given the lack of specificity, the court had discretion to make whatever order seemed most appropriate in the circumstances, taking into account potential prejudice to both sides.

[12] The Master assessed the prejudice that each side might face and determined that the balance of convenience favoured the petitioner. Although acknowledging the logic of ICBC’s submission that it was under no obligation to pay UMP compensation until judgment had been obtained in the tort action and it was established that the tortfeasor could not pay it, he held that such a process might involve everyone in an extremely lengthy and expensive jury trial which may prove to be a completely useless exercise if Mr. Beauchamp succeeds in establishing liability, but an arbitrator later rules that there was no entitlement to UMP coverage.

[13] In the result, the Master ordered that an arbitrator be appointed to determine Mr. Beauchamp’s entitlement to UMP coverage on the assumption that judgment had been obtained against the tortfeasor and on the further assumption that the tortfeasor was unable to satisfy the judgment.

SCOPE OF REVIEW

[14] ICBC submits that because the order is final in nature and fully disposes of all issues raised in the petition the Master did not have jurisdiction to hear the petition. If the Master had jurisdiction, ICBC submits that the order was vital to the final outcome of the proceeding or is a pure question of law, and therefore the proper forum of review is a re‑hearing: Abermin Corp. v. Granges Exploration Ltd. (1990), 45 B.C.L.R. (2d) 188 (S.C.). Alternatively, ICBC submits that the Master’s conclusion was clearly wrong.

[15] With respect to jurisdiction, I share the concerns of ICBC as to whether or not the Master had jurisdiction to make the order in question. As I am satisfied that the proper forum for review is a re-hearing, I need not decide the jurisdiction issue.

DISCUSSION

[16] This is, with respect, not a case of balancing prejudices. Mr. Beauchamp's tort claim against Mr. Smith is a separate proceeding from his UMP claim. They are not parallel proceedings; they must proceed sequentially. Resolution of the tort claim is a prerequisite to UMP coverage.

[17] UMP coverage is only available when the tortfeasor is an “underinsured motorist”. That term, as previously noted, is defined in the Regulation and requires that the tortfeasor be an owner or operator of a vehicle, legally liable for the death or injury of an insured, but unable to pay the full amount of the insured's damage. There is no UMP coverage unless a tortfeasor meets these criteria.

[18] I agree with the comments of Hogarth J. in Dahl that s. 148.2 does not apply until the existence of an underinsured motorist is determined. In this case, that requires a determination that Mr. Smith is legally liable for Mr. Beauchamp's injuries and is unable to pay the full amount of damages awarded in respect of those injuries. Legal liability and damages can only be decided in the tort action.

[19] UMP is available to persons injured or killed in accidents with underinsured motorists. The entitlement is a contractual one as between an injured party who meets certain prerequisites (the “insured”) and ICBC. Coverage is not absolute. Disputes about whether an insured is entitled to compensation and the amount of compensation are resolved by arbitration.

[20] ICBC cannot be compelled to participate in an arbitration concerning UMP coverage until the prerequisite for such coverage has been established. The Master was clearly wrong in ordering an arbitration based on hypothetical or assumed facts which may never come into existence.

[21] In the result, the appeal is allowed. The petition is dismissed with costs.

“R.B.T. Goepel, J.”
The Honourable Mr. Justice R.B.T. Goepel

Citation:	*Beauchamp v. I.C.B.C.,*
	2005 BCSC 63